Stockbroker ran Broadway scam, authorities allege

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A production of "The Producers," a comedic Mel Brooks musical, on Broadway.

Story highlights

Businessman and stockbroker Mark Hotton is arrested at his Long Island home

Authorities say he created fake investors to fool producers of "Rebecca: The Musical,"

Hotton promised the show a $4.5 million investment from four overseas investors, officials say

When pressed, he said one investor had died of malaria, authorities say

It was producers who cooked up a money-making scam in the Broadway show "The Producers," but officials allege it was producers who were the victims in a real-life Broadway scheme.

Authorities arrested businessman and stockbroker Mark Hotton at his Long Island home Monday morning on charges of defrauding Broadway producers and a Connecticut-based real estate company in two separate ruses, the U.S. district attorney in Manhattan and the FBI said in a news release.

From September 2011 to October 2012, Hotton created fake investors and businesses to fool producers of "Rebecca: The Musical," the release said.

Hotton promised the show a $4.5 million investment from four overseas investors in return for $60,000 paid to Hotton and entities that he owned, authorities allege. He also is charged with a separate $750,000 real-estate scheme.

The "Rebecca" producers were introduced to Hotton through the investment community in February 2012, when they had fallen about $4 million short of their budget, producer Ben Sprecher told CNN Tuesday.

The producers signed an agreement with Hotton's TM Consulting Inc. on February 7 that entitled Hotton to a $7,500 fee and a guarantee of 8% of any money he raised in excess of $250,000, the government said.

Hotton claimed to have secured the $4.5 million from four investors, identified in the news release as Paul Abrams of Hawthorne, East Victoria; Roger Thomas of St. Peter Port, Guernsey; Julian Spencer of Crocker Hill, Chichester, Sussex; and Walter Timmons of London. All of them Hotton allegedly created and portrayed himself through e-mail.

Sprecher said he had not doubted the legitimacy of the deal because of the phone conversations and e-mail correspondences that he had with supposed investors. Hotton had even introduced him to a woman he said was Paul Abrams' niece, he said.

But when producers started pressing Hotton for the money, Hotton told them Paul Abrams had suddenly died of malaria, Sprecher said.

Manhattan U.S. Attorney Preet Bharara said that in an investigation begun in September 2012, officials uncovered that the investors' e-mail accounts and the websites for businesses associated with the investors were all controlled by Hotton.

"As part of one alleged scheme, Hotton concocted a cast of characters to invest in a major musical -- investors who turned out to be deep-pocketed phantoms," Bharara said in the news release. "To carry out the alleged fraud, Hotton faked lives, faked companies and even staged a fake death, pretending that one imaginary investor had suddenly died from malaria."

Producers had already spent $6 million on Rebecca and were about to begin rehearsals when they found out the $4.5 million from Hotton was not there, Sprecher said. They are now searching to replace that capital and move forward with the show, which has been indefinitely postponed.

Hotton is expected to be presented at federal court in Central Islip, New York, where he will face up to 20 years in prison on each charge, according to officials.